As the trend for higher US bond yields and a stronger USD gathers pace, we’ve revisited what it all means for our currency forecasts. Broadly speaking, we’ve taken on board the idea that the trend in the US economy and US dollar has turned. The upshot is that our NZD/USD forecasts have been lowered relative to the last Markets Map. We now see the NZD/USD at 0.7800 by year-end, albeit with risks tilted toward the upside. Our view of fundamental NZ outperformance hasn’t changed, however, and is still reflected in the forecast appreciation of NZD/EUR, NZD/JPY, NZD/GBP and NZD/AUD. The case for NZD/AUD appreciation is particularly compelling given the ongoing underperformance of the Australian economy.
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